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As we all move toward getting back to normal post-pandemic, we can all probably agree on this: remote working opportunities have skyrocketed and they are here to stay (for now, at least!). 

This brings new challenges but also new opportunities to most businesses. Companies are having to adapt to keep their workforce happy, which oftentimes involves allowing remote work on at least a part-time basis. It also brings new opportunities to look for talent nationwide (or even abroad), as remote working means geography is no longer a constraint in the recruitment process.

What are the Impacts of Remote Work on R&D Credit ?

As a result of this massive change in how companies are doing business, our clients are wondering how this change impacts their ability to claim the R&D credit.  When we get this question, we always tell clients we have good news and bad news.  The good news?  For the federal R&D credit, so long as the Company’s employees are still in the United States, it can claim the credit similarly to how it has in the past.

The bad news?  For state R&D credits, the Company will likely need to re-evaluate how its credit is calculated, especially if its offices are in a city where people commute from out of state (i.e. Philadelphia, New York City, Washington D.C.).

This is because most state R&D credit calculations require an analysis of the physical location of the R&D activities.  For example, if a company’s headquarters is in Philadelphia and it requires all employees to work from its Philadelphia office, the activities for state R&D credit purposes are happening in Pennsylvania.  Therefore, the company could calculate an R&D credit for Pennsylvania including 100% of the R&D activities in the calculation. However, if it this company now allows its employees to work remotely, it must analyze where each employee is working and update the calculation to only include individuals working in Pennsylvania.

There is some good news to come out of this, though!  If a Company has enough employees working in another state, it is possible that the company is now eligible to claim an R&D credit in a state it previously could not.  For example, in the Philadelphia example above, if some of those remote-working employees are now working from New Jersey, this company may be eligible for a New Jersey state R&D credit.

Here at EPSA, we are experts in all state R&D credits. Therefore, as part of our process, we evaluate the location of all activities and determine whether a state R&D credit is available.  If there is a credit available, we will calculate it!

Interested in learning more about available state R&D credits?  Visit our website!